Building a Successful M&A Strategy

An M&A strategy is a plan which details the corporate development activities of a company or enterprise. It lays out plans for the mergers and acquisitions which benefit you and your business. The M&A strategy typically involves a plan for exiting the business for the optimal value or securing investment for company growth.

For owners of middle-market companies, it is worth being aware of the following typical factors that can play a key role in how and why acquisitions are carried out.

  • Most middle-market executives decide to go through with acquisitions to drive growth by acquiring capabilities, technology, market share and/or talent.
  • Inorganic growth commonly plays a vital role in company growth strategy for the majority of middle-market executives who participate in M&A. The wish to stimulate growth is the principal reason companies engage in M&A.
  • The availability of funds to pursue a constant number of targets typically drives business valuations up. This is especially true in the current business climate where we are seeing a slight increase in the number of deals going through, implying that there is an increased number of players in the game at the moment together with a heightened sense of urgency around deals.
  • Advance can be slow and difficult to measure as a result of unexpected issues in many deals, with most taking 3-6 months to conclude. The preparation period prior to the negotiation phase should ideally be three to five times longer than the deal-making process itself.
  • It is important to seek help with planning, financial reporting, valuation (business appraisal) and execution well in advance of locating a specific target if you want to ensure that you are ready to move when the time comes.

If you own a middle-market business today and you have not thought about your M&A strategy yet, you should seriously consider doing so.

If you desire to exit in the next 9-36 months, it is imperative that you get started today. To make the process as smooth and profitable as possible, you should start a relationship with an M&A advisory firm now.

How can an M&A advisory firm help me?

Very few privately-held businesses can be considered “buyer ready” the moment the owner(s) makes the decision to sell. At A. Neumann & Associates LLC, one of the most important advisory services that we offer is designed to help sellers see their companies through the eyes of buyers in a detailed M&A strategy.

One of the most important documents that we prepare for each client is our Roadmap for Enhancing Value. As a key part of our due diligence checklist, this document allows the business owner to determine the steps he/she needs to take in order to optimize a business’ market valuation.

Not many people who are selling a business realize the importance of having such a roadmap in place until they are well into the due diligence process when the buyer begins to express concerns about issues such as:

  • A lack of middle management
  • Excessive dependence on owner
  • High customer concentration
  • Inadequate accounting / MIS systems
  • Lack of documentation

These are just a small selection of obstacles that an effective M&A strategy will help you navigate in the process of successfully exiting your company.

When the issues above surface at an inopportune stage of negotiations, two things typically occur. First, the valuation of your business is threatened, and second, contingencies such as earn-outs become part of the transaction.

Deals often fall through because sellers have not endeavored to make sure that their businesses are buyer-ready. When this happens, the risk becomes too great for a buyer to proceed with the deal.

Embark on an M&A Strategy today with A. Neumann & Associates, LLC

Hiring an experienced M&A advisory firm like A. Neumann & Associates, LLC is the wisest choice when you are selling your business. We have 50+ years of experience among our professionals and can guide you through the process to help you enhance the salability of your company.